Lateral Thinking Pty Ltd and Australian Securities and Investments Commission
[2014] AATA 405
•20 June 2014
[2014] AATA 405
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2014/1860
Re
Lateral Thinking Pty Ltd
APPLICANT
And
Australian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal Prof R Deutsch, Deputy President
Date 20 June 2014 Date of written reasons 24 June 2014 Place Sydney The Tribunal refuses the Applicant’s application under section 29(7) of the Administrative Appeals Tribunal Act 1975 for an extension of time to lodge an application for a review.
.................[SGD].......................................................
Prof R Deutsch, Deputy President
CATCHWORDS
PRACTICE AND PROCEDURE – Application for extension of time to lodge application for review – factors relevant to an extension of time – explanation of delay – irregularities in evidence – merits of substantive application – application refused
LEGISLATION
Administrative Appeals Tribunal Act 1975; s 29
Corporations Act 2011; ss 109X, 205B
CASES
Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344
Duong v Australian Postal Corporation [2005] FCA 991;(2005) 41 AAR 288
REASONS FOR DECISION
Prof R Deutsch, Deputy President
24 June 2014
This is an application to the Tribunal by Lateral Thinking Pty Ltd (the Applicant) seeking an extension of time within which it can lodge an application for a review of a decision made by the Australian Securities and Investments Commission (ASIC) (the Respondent) to cancel its Australian Financial Service Licence (AFS Licence). The Respondent’s decision was made on 28 November 2013 and communicated to the Applicant by letter served upon it on 11 December 2013.
Under s 29 of the Administrative Appeals Tribunal Act1975 (the AAT Act) an application for review of the Respondent’s decision to cancel the ASF Licence must:
(a)be in writing;
(b)be made in accordance with the prescribed form;
(c)contain reasons; and
(d)be lodged with the Tribunal within the period commencing on the day on which the decision is made and ending on the 28th day after the day on which the document setting out the terms of the decision is given to the Applicant.
In relation to the final point ss 29(7) of the AAT Act provides :
“The Tribunal may, upon application in writing by a person, extend the time for the making by that person of an application to the Tribunal for a review of a decision (including a decision made before the commencement of this section) if the Tribunal is satisfied that it is reasonable in all the circumstances to do so.”
Thus, the Applicant had 28 days in which to apply for a review of the decision to cancel its AFS Licence from the date on which it was served with the letter containing ASIC’s decision, being 11 December 2013. This would put the final date for making such application at 8 January 2014. No such application was filed with the Tribunal until 16 April 2014, some three months later.
The question for determination in this application is whether the Tribunal should allow an extension of time within which the Applicant can lodge its application for review of the decision of the Respondent to cancel its AFS Licence.
THE APPLICANT’S CONTENTIONS
The Applicant contends that the application for an extension of time should be granted having regard in particular to the following matters:
(i)a number of pieces of correspondence which were attempted to be served on the Applicant were never received and never came to the attention of the Applicant within the time period for making the original application for review of the ASIC decision;
(ii)there were significant time delays incurred by the Applicant in seeking legal advice, as well as attempting to resolve substantial issues with third parties resulting from the cancellation of the AFS Licence;
(iii)significant financial loss would be suffered by the Applicant if an extension of time is not granted; and
(iv)the Applicant believes that it has a strong case in having its AFS Licence reinstated and contends that it should never have been cancelled in the first place.
THE RESPONDENT’S CONTENTIONS
The Respondent contends that the application for an extension of time should not be granted having regard in particular to the following matters:
(i)service of the relevant correspondence and documentation was affected at postal, email and other addresses which according to the latest available information provided to the Respondent were all correct addresses for the Applicant;
(ii)receipt of certain email correspondence has now been acknowledged by the Applicant;
(iii)the Applicant rested on its rights and has not given a proper explanation for the approximately three month delay in making its application to the Tribunal; and
(iv)the Applicant has no realistic prospect of success in the substantive application for review of the decision to cancel their AFS Licence.
RELEVANT AUTHORITIES
There are a number of cases which have dealt with applications for extensions of time under s 29(7) of the AAT Act.
The starting point is the decision of Wilcox J who considered the grant of an extension of time pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344. That decision was subsequently endorsed by Edmonds J in Duong v Australian Postal Corporation [2005] FCA 991;41 AAR 288 at 293-294 , where in considering an application for an extension of time pursuant to s 29(7) of the AAT Act His Honour summarised the applicable principles as follows:
(1) Prima facie, proceedings should be commenced within the prescribed period and an applicant for extension must show “ an acceptable explanation of the delay” and that it is “fair and equitable in the circumstances” to extend time;
(2) any action taken by the applicant, other than by making an application for review, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished. A distinction is to be made between the case of a person, who by non—curial means, has continued to make the decision maker aware that he contests the finality of the decision (who has not “rested on his rights”) and a case where the decision-maker was allowed to believe that the matter was finally concluded;
(3) Any prejudice to the respondent, including any prejudice in defending the proceedings occasioned by the delay, is a material factor militating against the grant of an extension;
(4) However, the mere absence of prejudice is not enough to justify the grant of an extension. In this context, public considerations often intrude. A delay which may result, if the application is successful, in the unsettling of other people or of established practices is likely to prove fatal to the application;
(5) The merits of the substantial application properly to be taken into account in considering whether an extension of time should be granted;
(6) Considerations of fairness as between the applicant’s and other persons otherwise in a like position are relevant to the manner of the exercise of the court’s discretion.”
It is clear from the decided case law that in considering an application for an extension of time the Tribunal will have regard to a range of factors and no one particular factor will carry primacy over the others. All that is relevant to the particular case has to be weighed together in reaching a decision (Zizza v FCT (1999) 55 ALD 451).
In this case there are a number of critical factors that are relevant to the Tribunal’s decision. Most fundamentally the following matters have weighed heavily in the Tribunal’s decision making process:
(i)The question as to whether the Applicant was, or should have been, aware of the serious regulatory issues it was facing;
(ii)Whether there is any satisfactory explanation for the tardiness of the Applicant in pursuing its review rights;
(iii)The behaviour of the Applicant and in particular its sole director; and
(iv)the merits of the substantive application.
I will now deal with each of these matters sequentially.
Notices not received
It seems that the Respondent made at least 11 different attempts to convey to the Applicant the essential message that fundamental documentary requirements had not been fulfilled and that there was a serious case to answer, failing which it’s AFS Licence may be cancelled.
In chronological order these attempts can be summarised as follows:
(a)1 February 2011 - Letter from the Respondent informing the Applicant of its failure to lodge financial statements and auditor’s reports for the 2010 financial year;
(b)29 March 2011 - Compliance correspondence from the Respondent issuing a notice to the Applicant under s 1274(11) of the Corporations Act 2001;
(c)1 February 2012 - Letter from the Respondent informing the Applicant of its failure to lodge financial statements and auditor’s reports for the 2011 financial year;
(d)2 April 2012 - Compliance correspondence from the Respondent issuing a notice under s 1274(11) of the Corporations Act 2001;
(e)1 February 2013 - Letter from the Respondent informing the Applicant of its failure to lodge financial statements and auditor’s reports for the 2012 financial year;
(f)29 April 2013 - Compliance correspondence from Tim Matthews issuing a notice under s 1274(11) of the Corporations Act 2001;
(g)9 July 2013 - Email from Melissa Mandy, an analyst employed by the Respondent, to Jan Walsh, the Applicant’s former General Manager, informing the latter of the outstanding annual accounts and its intention to take licensing or legal action for non-compliance if the outstanding accounts are not received by 26 July 2013;
(h)12 August 2013 - Email from Ms Mandy to Ms Walsh requesting that the latter contact her regarding outstanding accounts and consideration of legal action if the outstanding accounts are not received by 26 August 2013;
(i)30 October 2013 - Letter served upon Mr Paul Huggins, sole director of the Applicant, at his registered personal address in Victoria, notifying the Applicant of a hearing to be held under s 915C of the Corporations Act 2001;
(j)28 November 2013 - Notice of cancellation AFS licence made by ASIC delegate,Kate Dluzniak;
(k)11 December 2013 - Letter served upon Mr Huggins at his registered address notifying the Applicant of the cancellation of its AFS Licence and other particulars.
According to the submissions provided to the Tribunal by the Applicant and the oral testimony of Mr Huggins, not one of the 11 items of correspondence identified above was ever received by the Applicant.
The Applicant also filed a statutory declaration made by Ms Walsh dated 12 May 2014 in which she declared that she never received any of the previously mentioned items of correspondence. Ms Walsh was not available for cross-examination during the hearing. Following the hearing the Tribunal was advised by the Applicant’s representative that Ms Walsh now concedes that she received at least some of the relevant items which she had previously denied receiving. The Applicant’s representative also indicated that the Applicant no longer wished to rely on the matters contained in her declaration.
Ms Mandy also had two telephone conversations with Ms Walsh in February and April 2013 during which she provided warnings to Ms Walsh regarding the action the Respondent was consideration taking in relation to the Applicant’s obligations and failure to lodge documents. Ms Mandy enquired as to Ms Walsh’s email address on 18 February 2013 and followed up the telephone conversation with an email reminder warning on 27 February 2013. This is summarised in a witness statement signed by Ms Mandy and dated 22 May 2014.
In relation to the Applicant’s claim that the ASIC notices were not received, it is clear that the formal warning documents were addressed to the Applicant’s registered address at the time. In addition the notice of hearing in respect of possible cancellation and the notice of the original decision to cancel the AFS Licence were personally served at Mr Huggins’s residential address, as notified by the Applicant to the Respondent in the required statutory records for the Applicant.
The Applicant asserts that “the documents never came to the notice of the company because Mr Huggins had moved abodes”. However ASIC’s records indicate that no notification of a change of address was ever received during the period in question. The address at which the notices were served remains the address on record for Mr Huggins in respect of his being a director of the Applicant. It would appear that on this basis service has been properly affected within the context of the Corporations Act 2001.
It is also worth noting in this context that section 205B of the Corporations Act 2001 requires a company to lodge with ASIC a notice of the personal details of the director (which includes the private residential address) and any change to those details should be provided on prescribed forms in a timely manner. Failure to comply with this provision is an offence of strict liability.
Thus, if it be the case that Mr Huggins changed his residential address during the relevant period, it does not appear that ASIC was ever notified of this event by the Applicant in accordance with its obligations under the Corporations Act 2001.
Leaving aside the technicalities regarding service for a moment, it is difficult in the current factual circumstances to accept a proposition that despite 11 different attempts to convey critical regulatory information to the Applicant regarding its failure to comply with obligations under the relevant law, the Applicant never (other than through the belated acceptance by Ms Walsh that she received the emails referred to above) became aware of any problem in relation to its regulatory history over a period of approximately four years.
Delay due to legal advice
According to the submissions made by Applicant and the verbal testimony provided by Mr Huggins, the Applicant asserts that it was not made aware of the cancellation of its AFS Licence until late 2013 or early January 2014 when its platform provider Colonial First State made an enquiry about the license. Thereupon the Applicant asserts that it stopped its operations and tried to contact ASIC officials to enquire about the cancellation. According to the Applicant’s submission they had wished to exhaust all options before taking any action to have the licence reinstated through the administrative appeals process and held discussions with Colonial First State about contingency plans. On 5 February 2014 a financial services law firm was retained and that firm looked at all legal options available before it was decided that the only remaining option that the Applicant could seek was to apply to this Tribunal for a review of ASIC’s decision.
After having retained a financial services law firm to act on its behalf in early February 2014, the application for an extension of time was not filed with the Tribunal until 16 April 2014. Notwithstanding all that has been said by the Applicant’s advisers, it is still not clear to this Tribunal as to why two further months elapsed between the adviser’s engagement and the filing of the application for an extension of time. This is not satisfactory.
Applicant’s behaviour and the irregularities in documents
I now turn to the Applicant’s behaviour and the irregularities in documents before this Tribunal. During the hearing the Applicant’s key witness, Mr Huggins, was cross-examined extensively in relation to these issues.
A large part of the cross examination conducted by counsel for the Respondent involved a review of a number of forms which had been signed by Mr Huggins and filed with ASIC as part of the Applicant’s ongoing statutory obligations under the relevant corporations law.
In particular, the Applicant’s advisor forwarded to ASIC a letter dated 13 May 2014 under cover of which a series of forms FS70 and FS71 were lodged with ASIC in relation to the financial years ending 30 June 2010, 2011, 2012 and 2013. The advisor stated in that covering letter that :
“Our client is not able to locate the original copies of the documents but we understand that ASIC is able to accept lodgement of copies of the documents (as is the case with online lodgement). Our client thought the accounts for the first three years have been lodged but apparently, due to miscommunication with its accountants and auditors, they have not been lodged.”
Accompanying the letter were what purported to be copies of a series of forms in relation to each of the four years in question.
Under rigorous cross-examination Mr Huggins confirmed that his signature appeared on a number of occasions on each of those forms. Next to each signature on each occasion was a very specific date. For example, in relation to the form for the year ended 30 June 2011, the date that appears next to the signature of the witness purporting to be the date on which the witness signed the form is 17 February 2011. In addition, the date appearing in the top right hand corner of the signed form is 18 December 2012. It would seem, and this fact was never disputed by either side, that the later date was the date the form was printed. Perhaps somewhat bizarrely it thus appears to be the case that Mr Huggins has managed to sign a form before it came into existence. This required some explanation which understandably the witness was unable to provide.
The date on which the form was apparently signed is highly questionable for two reasons which became apparent during cross-examination of Mr Huggins. First, as mentioned above, the date of signing appears to have occurred on a date which predates the creation of the form. Secondly, the apparent date of the signature predates by over four months the closing of the financial year in relation to which the form is relevant. This must raise the question as to how one can certify an amount as being the full-year profit some four and a half months before the close of the year for which the profit is calculated.
Under cross-examination Mr Huggins intimated that there was a strong possibility that he signed the form without attaching a date and that the relevant date was subsequently inserted by someone else. He could offer no explanation as to how the signature could have been attached to a form which was created almost three months after the date of apparent signing.
Counsel for the Respondent asserted that this was a clear case of backdating of documents which the witness appeared to neither confirm nor deny.
Since the hearing the Tribunal has been informed that the documents were indeed backdated by a company employee and this was apparently unbeknown to Mr Huggins. During his oral testimony Mr Huggins sought to explain his position on the basis that he is an exceptionally busy person who signs many forms that are put in front of him.
I do not believe that the practice of directors of either public or private companies signing forms without dating them has ever been acceptable. While I have no doubt that such a practice is all too common, that does not make it correct. Directors, no matter how busy, no matter what the workload, are required, at the very least, to understand the documents which they sign and to understand the significance of the date on which they have signed those documents. They should not under any circumstances leave the date to be inserted by someone else. If they do so and the date applied is the incorrect date, the directors must wear the consequences of putting themselves into a position where they may be seen to have backdated documents or at the very least to have allowed the circumstance to unfold that someone else has back-dated the relevant documents which they have deliberately left undated.
Furthermore, I do not believe that it is too much to ask of a director who certifies the accuracy of certain accounts, that at the date of signing he should query how the accounts could have been finalised four months before the close of the relevant period to which the accounts relate. If at the time of signing the relevant period has not concluded, the director must be taken to understand and take responsibility for signing at that time and to take responsibility for the absurdity of the position he has taken. He cannot deflect responsibility by attributing the problem to other employees in his company.
Merits of the substantive application
The Applicant believes that it has a strong case in having its AFS licence reinstated and that their licence should never have been cancelled.
The exact basis for this assertion remains somewhat of a mystery – while certain indications were made by the Applicant as to further matters that may arise in relation to the merits review of this matter, no details were provided of the exact nature of any such additional information. It remains impossible for the Tribunal to take a view on additional information which it knows nothing about.
On the current state of the evidence which has been presented both in written and verbal form, the Tribunal is not convinced that the Applicant's case is strong. Indeed having regard to all the matters previously discussed, the Applicant’s case is, in the Tribunal's view, weak.
CONCLUSION
The Tribunal is mindful that the ongoing cancellation of the Applicant’s ASF Licence has caused and will continue to cause the Applicant significant financial hardship. Nonetheless it is impossible to disregard the very serious nature of what can at best be described as the Applicant’s on-going indifference to its regulatory obligations during the period in question. The representative for the Applicant sought valiantly to suggest that these were mere technical breaches of its obligations but for the reasons set out above the Tribunal cannot accept that proposition. He also argued that the Applicant was largely compliant with its regulatory obligations – in this context it is worth noting that the Applicant failed to lodge audit reports for three financial years.
Furthermore the Applicant’s behaviour in relation to the alleged copies of the relevant forms FS70 and FS71 cannot be ignored.
DECISION
The Applicant’s application for an extension of time to file an application for review is refused.
I certify that the preceding 41 (forty -one) paragraphs are a true copy of the reasons for the decision herein of Prof R Deutsch, Deputy President ......................[SGD]..................................................
Associate
Dated 24 June 2014
Dates of hearing 27 May and 13 June 2014 Advocate for the Applicant Innoinvest Consulting Counsel for the Respondent Mr A Shearer Solicitors for the Respondent In-house
Key Legal Topics
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Administrative Law
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